Institutional Reality and the Dystopia of Markets
Implementation of new initiatives to foster choice and competition through markets in health care, education, and transportation brought a disconcerting revelation: institutions mediate the translation of market theory into policy practice. The market model had missed something important: consumers, providers, and complex organizations reach decisions and behave in ways that do not always follow the script. The incentives that were expected to accompany competition did not consistently appear on cue.
As the new day of dynamic markets dawned, journalists, citizens, advocates, and (of course) special interests questioned whether the public interest was well served. Questions turned into investigations and opposition, which attracted the attention of politicians who found their offices on the receiving end of complaints from constituents. Chalkboard models and grand theory receded as Republican and Democratic officials hastened to respond. This chapter traces the institutional reception given to market reforms and policy makers' pragmatic retreat.
Lucid models of markets that would deliver more and better services at lower costs worked wonderfully in building coalitions, winning official support, and launching new policies. The trouble emerged in the many, often arcane, details of institutional performance.